eBay (NASDAQ:EBAY) will not have to fake any excitement about acquiring a 25% stake in craigslist, a popular Internet bulletin board with classified ads and forums. With coverage of 45 cities and a billion page views a month from more than 5 million unique visitors, craigslist certainly has a strong online presence.
Though they have a similar goal in building online communities, there are many differences between the two sites. eBay uses feedback to signify trustworthiness, while craigslist offers complete anonymity for posters. Where eBay makes its revenue by charging for listing fees and a percentage of the final auction value, craigslist's revenue comes from charging employers to post job listings in San Francisco, New York, and Los Angeles. All other listings are free.
In fact, many craigslist devotees are fans precisely because of the non-commercial nature the site has had from day one. craigslist turned down an offer for banner advertising from Microsoft (NASDAQ:MSFT) Sidewalk early in its history, and until today the site has eschewed banner ads. The mind-set of many users can be seen from the comments on founder Craig Newmark's blog, where worried fans posted conspiracy theories about the site starting to charge for listings or practicing censorship in the near future.
Craigslist junkies need not worry that their favorite site will "sell out" anytime soon, however. The equity eBay purchased was owned by a former craigslist employee who initiated the transaction. Newmark emphasized in his blog, "I made craigslist into a real company in '99, and made it a corporation (on paper, not attitude)." Spokeswoman Susan MacTavish Best reiterates this sentiment: "Craigslist has never sought any outside money, and that's not going to change."
Given this stance, what does the purchase provide eBay? Well, creating a site that replicates craigslist is no problem for a giant such as eBay. Generating the amount of traffic craigslist does while fostering a fervent grassroots community is a whole different story. The investment allows eBay an in-depth look at a market it has yet to conquer and lets it swap knowledge and expertise. Since eBay does not expect the purchase to change its financial guidance for the third quarter, essentially eBay has given itself the chance to learn more about localized classifieds with negligible impact to its bottom line. And that sounds like a good deal to me. I'll have what eBay is having.
eBay is a Motley Fool Stock Advisor recommendation. To discover which other companies have made the cut, subscribe for six months, without risk.
Fool contributor Tim Goh does not own any stake in the companies mentioned.
